“I have failed as an entrepreneur”. “I gave it my all – I am very sorry.” It was gut wrenching to read these words in the last letter V.G. Siddhartha wrote to his Board and employees before taking the decision to end his life. It was unbelievable that the creator of one of India’s most famous coffee brands considered himself a failure.
This letter and his consequent suicide resonated deep inside me – perhaps because I was brought up by two entrepreneurs and also married one. I grew up seeing and observing my parents’ struggles and stand right behind my husband during his tough times.
Entrepreneurship is a very hyped word today – with many governments and development institutions putting their might behind supporting entrepreneurs. But by no means is this an easy road. The road may have unexpected twists and turns, dead ends and roadblocks. The funding you need may never come through or the customer may take too long to pay. Government policies may change unannounced or the economy may start to slide just as your business has started picking up. Labour or employees may be looking for a raise when there is already a downward pressure on your margins. Or perhaps the sales projections you had made were too ambitious and now you have sunk in a lot of borrowed funds with no way to repay them. And your investors are tired of waiting for their returns. Sounds like a scary scenario, doesn’t it? Scary but highly likely that an entrepreneur will face at least one or more of these on his/her road to building (or not) a viable business.
More than institutional support and funding, an entrepreneur needs an unbreakable spirit and a tough make of mind. “when the going gets tough, the tough get going.” As Talish, Lawyer and partner at her own law firm puts it, “Forget the glamour and the fun stories, this is a journey not for the faint hearted. The highs are high, the lows heart stopping and the burden back breaking.”
I decided to speak to some of my entrepreneur friends and see what they have learnt through the years – the mistakes they made and the challenges they faced. I didn’t realise I was in for a surprise. Despite speaking to entrepreneurs from fields as diverse as financial services consulting to event management to water proofing solutions, the key learnings that came out of them were strikingly similar. Sharing their insights, in the hope that this would encourage anyone who might be in need of encouragement today. Here goes:
Be ready to be the founder director and the peon of your company: I remember my mum always used to say that when you are running your own ship, you may have to do everything starting with sweeping your own floor. Architect Stuti echoes the same thought. She remembers the time she and her husband Vibhor were setting up their office and couldn’t afford a fully staffed office. They were the copier, the admin, the accountant and the HR. “Managing so many roles at the same time and then doing your actual work can be exhausting and is not an easy task.”
Getting the first few clients is not easy: This goes without saying. And is even more relevant if you are young and as Stuti says “without enough grey in your hair!”. Age is often equated with experience and therefore quality too. The first few assignments are key, and it is important to do the job right. Design entrepreneur Kapil agrees – “our first client was one of the biggest in the industry and once we proved our worth to them, it was much easier building relationships with other buyers.”
Sales do NOT mean profits: I know it is the sales figures that really pump up our adrenaline. But in the joy of increasing your sales – do NOT forget that your objective is profits and not sales. If your sales are growing by 10% every year but the costs by 15% – perhaps you need to look at your costs. And right when you start out – it is important to decide how long you will give your business to make profit. In most businesses a three-year horizon is good enough – and if you are not making money even after three years, you need to take a hard look at your business model and see where you are going wrong.
Debt is a double-edged sword: Liquidity crunch is a constant companion for most entrepreneurs. Even if sales are good and so are profits, you may face cash crunch in your peak season. Debt is the easy answer but how much you borrow and from where becomes very important. Too much debt in a loss scenario or a low growth scenario worsens the problem. A lesson that event manager Varun learnt the hard way. He had already set up two successful businesses in jewelry and event management, when a friend suggested they invest in a property for weddings and provide end to end solutions. They each put in significant funds and Varun ended up borrowing 3 times his net worth. The business did well in its first year, but they were stopped in their tracks when a govt drive sealed their property and they had to close their business. To pay off his debts, Varun had to sell of one of his other properties and take a loan on another. His tip, “Know your limits – do not go beyond what you can reasonably service. Also have a proper plan for managing your risks.”
Shobhit, founder Tallbird Employment Innovations, seconds this. He was just out of college when he started his business. He had his own education loans to repay and had also taken loans for his start up. When his start up failed to take off, he struggled financially and took loans from friends. He defaulted on his education loans and had to appear in court. Finally, when the personal and financial stress became too much to handle, he reached out to his family and funders and told them it is not working, and he will eventually pay them back slowly. His advice would be to borrow from the right places initially and keep investors fully informed of the risks of failure. And if there are prior liabilities and loans to pay, have a plan in place and do not compromise on that.
Act FAST in an impending slowdown: As an entrepreneur it is extremely important to spot a slowdown when it is coming. Be prepared for there is a slew of hard decisions you may have to take. Many entrepreneurs hesitate to cut down on costs (read staff and assets) in the beginning of a slowdown. They go on as normal, hoping that things would pick up. In small set ups, workforce is like your family and laying off is never an easy decision. However, a delay in taking such decisions only makes the situation worse.
Deepak, founder of M2i Consulting, recalls the year 2010 when the microfinance industry went through a major crisis. It took him and his partners Atul and Rahul to realise the full impact of the crisis and another few months to start laying off their staff. I asked him how they felt letting go of their staff. He conceded it was tough, but went on to say that they tried to find alternate employment for the staff and continue to remain in touch with most of them.
I remember talking to another entrepreneur years ago, who after his industry hit a crisis just could not scale down his operations, but after a while there was not choice for him but to let go. He had to bring in an outside investor who anyway scaled down and he ended up losing a lot of his equity in the company. Kapil also admits that it took him a year to realise that the slowdown in his industry is there to stay and finally started to scale down his operations.
Diversify if possible: “Don’t put all your eggs in one basket”. An oft repeated phrase but always relevant. Deepak and his partners had just started to stabilize their business when their industry took a hit. As their clients felt the impact of the crisis, business started to dry up. Even committed assignments did not come through. They started exploring their contacts in Africa, also started providing services beyond the microfinance sector. By the time the microfinance industry picked up again, M2i had expanded to Africa and started different services catering other development sector clients.
Believe in yourself but also know your limits: A strong belief in one’s ability, one’s idea is required if you start on the path of entrepreneurship. However, at the same time, you need to be able to evaluate your own skills and shortcomings objectively. “You know what you can or cannot do – no one else can tell you that”, says Sandeep who has a water proofing business. After having established a strong business in 2003 – he found himself incurring a loss of 2crs in 2011. How? At the behest of a friend, he had decided to expand his business in 2011 and increased his workforce from 5 people to 28 in a matter of three months. However, within a few months he started losing money. He realized he couldn’t manage the larger workforce. But he also knew when to get out. Before the end of the year, he scaled back to his original size and is now happy with the steady flow of business and made a conscious choice to not grow too much.
Entrepreneurship is a lonely road, but keep your friends and mentors around you: Almost every entrepreneur I spoke to, talked about keeping a close circle of people around you. They are the safety net that catches you when you fall. As Talish says, “the most striking feature is the loneliness of being an entrepreneur – from the first landmark success to a silly error – each journey is unique and inevitably alone and self-driven. Self-care becomes the first casualty.” She goes on to say that she identified a group of people and sought them out to be her mentors. At the toughest times of her life, they have helped her reflect and think through issues; some have even walked with her to the finish line. When her 6 year old daughter was battling a rare disease in the hospital, it was a mentor who held her hand. And when she miraculously survived, another mentor helped her come out of the trauma.
Shobhit believes in having a support group that you can share your problems with. They can not only calm you down, but also provide the bird’s eye perspective that you may be missing, being in the middle of the action. Similarly, Deepak believes that having a group of close friends helps. Share with them your problems and feelings. You never know, you may chance upon and out of the box solution. He also advised against hiding your troubles from you family – because you simply cannot! They will find out anyhow! Despite what you may think, they will understand and become your pillars of support. Varun seconds that – after losing all his savings, he started getting into a depression. It was his family that stood by him and helped him restart. Kapil agrees wholeheartedly, “At my lowest points I have turned to my family and they have always been there to support.”
Be passionate, but do not take failure personally: Last but not the least, be passionate about your work but not to the extent of losing your objectivity. It is important to realise the difference between, “My Business Failed” and “I Failed”. There may be a number of reasons your business did not succeed – internal and external but blaming yourself will not lead you anywhere. A failed business is an opportunity to learn. The best that we can do is to learn from our mistakes and start at the beginning – whether as an employee or an employer.
Shobhit decided to close his business and take up a job. According to him, “It is important to know when to quit – sometimes we get so emotionally involved in an idea, it works negatively for us.” However, the experience and network gained at his start up continues to help him and has helped him grow personally and professionally.
Varun on the other hand continues to be an entrepreneur. He reestablished his event management company and is busy rebuilding his network and relationships.
Both struggled and faced failures and are stronger people today.
Remember, the failure of a business is not the end – it is an opportunity for you to pick up yourself and start walking again – perhaps down a new road.
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And finally my thanks to all the entrepreneurs who shared their experiences, because: